The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas top executive yesterday reassured investors it was “only a matter of time” before double-digit revenue and operating income growth eliminated balance sheet imbalances.

Franklyn Butler, the BISX-listed communications provider’s chief executive, told Tribune Business that “returning EBITDA margins back to where they used to be” was the best way to achieve profitability and erase the $33m “gap” between current liabilities and assets.

Speaking as Cable Bahamas unveiled its third quarter and nine-month results, Mr Butler said the “triple play” operator was at “the beginning of a significant turnaround” with group EBITDA (earnings before interest, taxation, depreciation and amortisation) up 56 percent year-over-year for the nine months to end-March.

He described the group as “punching above its weight”, and bucking the global communications industry’s struggle to achieve organic growth, and described Cable Bahamas as an organisation where all its dreams had become reality in terms of the US and domestic mobile expansion.

Mr Butler then revealed that Aliv, the mobile provider in which Cable Bahamas holds a controlling 48.25 percent stake, is forecast to produce its “first positive contribution to EBITDA growth for the group” during the current quarter that closes on June 30, 2019.

Aliv was “well within” global telecommunications industry standards for achieving such milestones, with the wider Cable Bahamas group “broadly in line” with where it had planned to be five years after embarking on an expansion that will this year double revenues compared to 2014 levels.

He declined to be drawn on when Cable Bahamas’ top-line growth would translate into a return to profitability and resumption of dividend payments to shareholders, but said he and the management team had investor “interests at heart at every stage”.

Cable Bahamas continued to cut its net losses during the three and nine-month periods to end-March 2019, with the “red ink” for the latter period slashed by almost 20 percent from $43.42m to $34.854m due to the improved top-line and operating income performance.

The communications provider has suffered two years of $50m-plus net comprehensive losses prior to 2019 due to the start-up financing needs of Aliv and its $100m US acquisitions, which resulted in three Florida-based companies being merged into the surviving Summit Broadband entity.

Many Cable Bahamas shareholders, typically focused on regular dividend payments as opposed to medium and long-term value that can be obtained if growth opportunities are properly executed, have become increasingly anxious over when these will resume and the company return to the consistent profitability of the past.

Mr Butler, though, said the group’s latest results showed the customer-focused strategy he outlined at January’s annual general meeting (AGM) to “transform the business”, together with cost containment and driving revenue/EBITDA growth, was starting to bear fruit.

And, while Cable Bahamas’ $100.799m in current liabilities exceeded current assets by more than $33m at end-March, Mr Butler said there was no cause for liquidity concerns as this would “correct itself” if current top-line growth is maintained.

“The reality is that as we get closer to EBITDA break even, we anticipate that will really correct itself,” he told Tribune Business. “The Board and I continue to manage the financial risks of this business.

“We’re well-positioned to address that area. It’s only going to be a matter of time. Over the next two to three quarters you will see that correct itself. The best way is to drive revenue growth and EBITDA.

“The banks and key financial partners have been very supportive of the journey we’ve been on, and to deliver the results we’ve been delivering is increasing confidence, not increasing risk.”

Cable Bahamas’ total revenues for the first nine months were ahead year-over-year by 14 percent at $187.891m, with close to 50 percent of that sum - some $92.5m - generated by its legacy REV cable TV, Internet and telephone business.

Summit Broadband contributed $54.5m, or near one-third, of the top-line with Aliv producing the $40.9m balance. Cable Bahamas’ two expansion investments accounted for 53 percent, or a combined $45.4m out of $64.4m, in group revenues for the third quarter.

As for EBITDA, this rose by 56 percent year-over-year to $39.6m for the nine months to end-March 2019 on the back of the top-line growth. The REV business and Summit Broadband generated EBITDA of $31.9m and $15.8m, respectively, with only ALIV producing an $8.1m operating loss for the period.

However, Aliv’s negative EBITDA for the third quarter was just $1.2m, and Mr Butler said: “This quarter, and the next quarter for sure, you will see EBITDA come back. That’s a significant measure for all our shareholders.

“As we saw in the third quarter, and which will continue in the fourth, EBITDA is catching up with revenue growth.... We anticipate that in the fourth quarter Aliv will make the first contribution to EBITDA growth for the group.”

Mr Butler told Tribune Business that Cable Bahamas was focused on “getting EBITDA margins back to where they used to be” as this would trickle down to the bottom line and improve the balance sheet.

Urging shareholders to stay the course, he said: “This business is going to be twice the size at the end of this quarter, in terms of revenue, compared to where it was in 2014 before it did the Summit Broadband acquisition.

“That’s a significant journey. EBITDA margins are on progress back to normal industry standards. This is the beginning of a significant turnaround for those numbers, and shareholders who have been on this ride with us should feel comfortable this executive team have their interests at heart at every stage.”

Mr Butler conceded there had been “a lack of clarity” around the rationale for Cable Bahamas’ Florida venture, which had raised concerns as to whether the acquisitions and subsequent Summit Broadband investment was “making sense for us”.

With growth opportunities limited in a mature Bahamian communications market, and uncertainty at that time as to whether Cable Bahamas would win the battle for the second mobile licence, the BISX-listed provider’s foreign expansion was designed to achieve geographical diversification and boost shareholder value.

“We needed to find growth from somewhere to create returns and value for shareholders,” Mr Butler said. He described Summit Broadband as “performing extremely well from a revenue perspective”, with a top-line that was ahead year-over-year by 16 percent at $54.5m for the first nine months. EBITDA for the same period was up 32 percent.

“These two investments [Aliv and Summit Broadband] that we put shareholder money behind are showing real signs of growth, and really getting to the point where shareholders will see value in them,” Mr Butler added.

Damian Blackburn, Aliv’s top executive, told Tribune Business that both the mobile provider and its controlling shareholder were in “the advanced part of the journey to grow EBITDA margins back to normal”.

He argued that they were outperforming the global communications industry, adding: “The telecoms industry has a challenge to grow revenue organically across the world. The group has been growing revenues by double digits for the second year in a row organically.”

Mr Butler, meanwhile, acknowledged that Cable Bahamas had encountered “some bumps on the way” with its expansion strategy, but added that as a result of “the level of growth we’ve demonstrated over the past two to three years and EBITDA catching up we’re broadly in line with where we thought we’d be five years ago”.